Choice of Business Organizations and Formation

Part I - Companies

Meaning of a Business Organization

• A business organization is a going concern.
• Profit-oriented.
• Duly formed and incorporated or registered under the extant laws in Nigeria – Ss 18 & 20 CAMA.

Types of Business Organizations

• Limited Liability Companies
• Sole Proprietorship
• Partnership
• Business Names

Right to Form a Company – S18

• Any two or more persons may form and incorporate a company – S18(1).
• One person may form and incorporate a private company – S18(2). (New under CAMA 2020.)
• A company may not be formed or incorporated for an unlawful purpose – S18(3).

Association / Partnership of More Than 20 Members – S19

Except it is a registered company under CAMA or another law, no association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any business for profit or gain – S19(1).

Exceptions – S19(2)

• Any co-operative society registered under the provisions of any enactment in force in Nigeria; or
• Any partnership formed for the purpose of carrying on practice:
  1. As legal practitioners, by persons each of whom is a legal practitioner; or
  2. As accountants, by persons each of whom is entitled by law to practise as an accountant.

Capacity to Form a Company – S20

A person is not qualified to form a company if he is:

• Less than 18 years of age;
• Of unsound mind and has been so found by a court in Nigeria or elsewhere;
• An undischarged bankrupt; or
• Disqualified under sections 281 and 283 of the Act from being a director of a company.